Public & private discoms may get REC interest sop

24 utilities from14 states move power finance body for subsidy

State-owned and private electricity distribution companies in financial stress due to expensive loans and government-imposed cuts in tariffs have sought relief from the National Electricity Fund (NEF) being implemented by the Rural Electrification Corporation (REC).

REC already provides interest subvention of 3-5 and 5-7 per cent on sanctioned project loans amounting to Rs 17,000 crore. Another Rs 8,000 crore of project loans will be sanctioned this week after the power ministry steering committee meets, according to an REC official. The different subvention rates are offered based on certain paramenters like reduction in AT&C losses and reduction in gap of supply cost and average price realisation per unit

Twenty-four distribution utilities in 14 states have applied for interest subsidy. After sanction of the NEF proposals by the steering committee, utilities can take loans from their lenders and can claim interest subsidy in the following year as reimbursement, subject to attainment of reform- linked benchmarks.

Sanjeev Kumar Gupta, REC general manager heading NEF, said, “The nodal agency will evaluate the utilities every year. They will get only on the basis of achievement of reform parameters after evaluation by independent evaluators.”

The states that have approached REC for relief under NEF include Maharashtra (with the maximum coverage of projects under NEF), Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Uttrakhand, Himachal Pradesh, Tamil Nadu, West Bengal, Punjab. Private distributors have also applied and include the Tata company that operates in Delhi.

NEF was set up to promote and incentivise investment in electricity distribution, which has traditionally always lagged behind targets.

Sanjeev Kumar Gupta, REC general manager heading National Electricity Fund (NEF), said “Unless this vital part of the power value chain is focused and it’s chronic problems are addressed, where will the huge quantum of power flow? Interest subvention is linked to performance in reducing distribution losses and narrowing the gap between average cost of power supply and the average revenue realisation, as NEF guidelines require.”

On December 13, 2011, the cabinet committee on economic affairs approved the creation of National Electricity Fund (NEF) to run the interest subsidy scheme.